Income Tax Appellate Tribunal - Indore
Income Tax Officer & Ors. vs Kalani Asbestos Pvt. Ltd. (Also Kalani ... on 29 July, 1992
Equivalent citations: (1993)46TTJ(INDORE)75
ORDER
--Revision thereof not justified.
Ratio & Held:
The Commissioner proceeded to revise the order of assessment, when it had undergone changes by process of rectification. Thus, what was available to the Commissioner for revision was the order of assessment as finally rectified and not the original assessment order. Therefore, the order of the Commissioner under section 263 deserves to be cancelled.
Application:
Also to current assessment years.
Income Tax Act 1961 s.263 Reassessment under s. 147--INFORMATION--Order of the jurisdictional Bench of Tribunal Ratio & Held:
Information received by the assessing officer subsequent to the original assessment as to law, even through an order of the Tribunal, having a bearing on the assessment and indicating escapement justifies initiation of reassessment proceedings. The assessing officer was already well informed of the decisions of the High Courts of Punjab and Haryana, Allahabad and Calcutta. He considered them and allowed the investment allowance. Those decisions were then binding even upon the Tribunal, since till then there was no contrary decisions. It cannot be said that the assessing officer came in possession of any `information'. It was only a difference of opinion, which came to the knowledge of the assessing officer. Tribunal's order cannot be treated as "information".
Application:
Not to current assessment years.
Income Tax Act 1961 s.147(b) ITA Nos. 65 & 66/Ind/1988; Asst. yrs. 1981-82 & 1982-83 (CO. Nos. 9 & 10/Ind/88, ITA Nos. 1070 & 1071/Ind/90; Asst. yrs. 1982-83 & 1983-84 ITA Nos. 67 & 68/Ind/88; Asst. yrs. 1983-84 & 1984-85, CO. Nos. 11 & 12/Ind/88; ITA Nos. 409/Ind/87 & 323/Ind/88; Asst. yrs. 1984-85 & 1985-86; ITA No. 568/Ind/90; Asst. yrs 1984-85 & 1985-86; CO. No. 27/Ind/1991 (Arising ITA 568/90) and ITA No. 316/Ind/90; Asst. yr. 1985-86) ORDER S. K. JAIN, J.M. :
These appeals and cross-objections relating to the same assessee, viz., M/s. Kalani Asbestos Cement Pvt. Ltd., Indore, but to different assessment years, have been heard together and are being disposed of by this common order for the sake of convenience.
I.T.A. Nos. 65 & 66/Ind/88 & C.O. Nos. 9 & 10/Ind/88; (Asst. yrs. 1981-82 and 1982-83)
2. The original assessments for the asst. yr. 1981-82 and 1982-83 were completed under S. 143(3) of the IT Act, 1961, on 20th Sept., 1982 and 11th Oct., 1982 respectively. In those assessments, the assessee was allowed investment allowance of Rs. 6,73,915 for the asst. yr. 1981-82 and of Rs. 31,205 for the asst. yr. 1982-83. Those assessments were reopened under S. 148 r/w S. 147(b) of the Act. The reassessments were framed on 21st Feb., 1986 for both these assessment years. In the said reassessment, the investment allowance allowed in the original assessments were withdrawn. The reason for initiation of proceedings under S. 148 and withdrawal of the said investment allowance for both the years, as stated by the Assessing Officer (AO), was that the order dt. 28th Feb., 1983 of Indore Bench of the Tribunal in ITA No. 558/Ind/82 relating to asst. yr. 1979-80 in the case of the ITO vs. Mittal Ice & Cold Storage, Indore was circulated by the CIT by letter dt. 18th May, 1983. In the said order, it was held by the Tribunal that no investment allowance was allowable on cold storage. That order was treated by the Assessing Officer as information within the meaning of S. 147(b) of the Act. On appeal, the CIT(A) held that the reopening of the assessment under S. 147(b) for both the years was bad in law. He observed that at the time of framing the original assessment for the asst. yr. 1981-82, the Assessing Officer had considered the various decisions of the High Courts, viz., CIT vs. Yamuna Cold Storage (1981) 129 ITR 728 (P&H), CIT vs. Kanodia Cold Storage (1975) 100 ITR 155 (All), CIT vs. Radhanagaar Cold Storage (1980) 126 ITR 66 (Cal). He also took into account the plea of the assessee that the assessee had manufactured frozen peas and in that process pea seeds were separated from pea fruits and were packed in bags and were then frozen, preserved and sold. This, according to the assessee, was a manufacturing process. The CIT(A) further observed that the Assessing Officer had clearly mentioned in the assessment order for the asst. yr. 1981-82 that the assessee had claimed investment allowance at Rs. 6,44,011 and that the assessee had completed all formalities and, therefore, the investment allowance was to be allowed. He further found that there was hardly any need of considering the allowability of the claim for the next asst. yr. 1982-83, when the assessment order for the said year was framed by the same Assessing Officer, after about a month, of framing the assessment order for the asst. yr. 1981-82.
3. Aggrieved by the said order dt. 16th Nov., 1987 of the CIT(A), the Department is in appeal. The assessee has filed cross-objections merely supporting that the order of the CIT(A) for both the years without claiming any relief.
4. It is contended by the learned Departmental Representative that order of the Tribunal on a point of law does constitute an information within the meaning of S. 147(b) and the Assessing Officer was bound to act upon that information particularly, when it was an order of the jurisdictional Bench of the Tribunal and was circulated by the CIT. Thus, according to him, the CIT(A) was in error in holding that the reopening of assessments were bad in law. Learned counsel for the assessee, on the other hand, supported the orders of the CIT(A).
5. There cannot be any quarrel with the proposition that information received by the Assessing Officer subsequent to the original assessment as to law, even through an order of the Tribunal, having a bearing on the assessment and indicating escapement justifies initiation of reassessment proceedings. In this connection, reference may be made to CIT vs. Raghunath Prasad Poddar (1974) 96 ITR 316 (Cal) and CIT vs. Makhan Singh (1985) 154 ITR 121 (Raj). But the instant case has peculiar facts. The Assessing Officer was already well informed of the decisions of the High Court of Punjab and Haryana, Allahabad and Calcutta. He considered them and allowed the investment allowance. Those decisions were then binding even upon the Tribunal, since till then there was no contrary decisions. As a matter of fact, the judgment of Punjab and Haryana High Court in the case of CIT vs. Yamuna Cold Storage (supra) was referred to before the Tribunal. It was biding upon the Tribunal in view of the CIT vs. Smt. Godawari Devi Saraf (1978) 113 ITR 589 (Bom). The Tribunal, however, in the case of Mittal Ice & Cold Storage, proceeded on the fact that it was a common ground that in the year of account, the assessee did not manufactures or produce any article. In view of these facts and circumstances, it cannot be said that the Assessing Officer came in possession of any information. It was only a difference of opinion, which came to the knowledge of the Assessing Officer. At this juncture, it may be mentioned that the order of the Tribunal, was, though, upheld by the M.P. High Court, but it was subsequent to the reopening for these two years. It is apparent that the Assessing Officer after having taken into account the various High Courts judgments resorted to the order of the Tribunal, which contained change of opinion. Such order cannot be treated as "information". There is yet another aspect of the matter, namely, that the facts in case Mittal Ice & Storage, were not same as those obtaining in the case of the assessee. The assessee had manufactured frozen peas. In this context, the following observation of the M.P. High Court in the case of Nav Nirman Pvt. Ltd. vs. CIT (1988) 174 ITR 574 (MP) at p. 578 are pertinent :
"It may be that in the circumstances of a given case, a mistake discovered in an order on the basis of a subsequent judgment of the High Court may be a mistake apparent on the record and a ground for rectification. The subsequent decision of the High Court should, however, in such cases, be directly in point. As held by the Supreme Court in State Orissa vs. Sudhansu Sekhar Misra AIR 1968 SC 647, a decision is only an authority for what it actually decides and what is of the essence in a decision is its ratio and not what logically follows from the various observations made in it."
6. In view of the above discussion, the consolidated order of the CIT(A) for the asst. yrs. 1981-82 and 1982-83 is sustained.
ITA No. 1070/Ind/90 - Asst. yr. 1982-83.7. The reassessment for the asst. yr. 1982-83, farmed on 21st Feb., 1986, as stated above, was set aside by the CIT(A) by order dt. 16th Nov., 1987, which has already been dealt with above. However, it was again reopened by the Assessing Officer under S. 148 r/w S. 147(b) of the Act by issuing a notice on 25th March, 1987. Again a reassessment was framed on 18th Feb., 1988, thereby the Assessing Officer without taking into account the order dt. 16th Nov., 1987 of the CIT(A), proceeded to compute the income as per order dt. 16th July, 1986 and further withdrew the deduction of Rs. 1,14,294 allowed in the original order under S. 80J of the Act. He also withdrew Rs. 37,722 on account of initial depreciation. The assessee went in appeal before the CIT(A), who by order dt. 25th Sept., 1990 held that the reopening of the assessment was bad in law. Hence, the Department is in appeal.
8. Learned Representative of the parties are heard. The reopening of the assessment is apparently arbitrary and without jurisdiction. We find merit in to observations of CIT(A), which are to the effect that there is no indication as to what was the information, which came into possession of the Assessing Officer and what was the source thereof, which made the Assessing Officer to reopen the assessment second time. In para 4(a) of the reassessment order, the Assessing Officer stated as under :
"The notice under S. 147 was issued for the following reasons :
"There was no positive gross total income of the assessee from the Cold Storage Unit. Further, the capital employed was incorrectly computed by adopting the value of depreciable assets as per book value in respect of W.D.V. and the amount of capital subsidy was not deducted from the cost of assets. For these reasons the deduction under S. 80J to the extent of Rs. 1,14,293 has been wrongly allowed."
9. At this juncture, it needs to the borne in mind that the assessment orders for the instant asst. yr. 1982-83 was subject-matter of appeal before the CIT(A), who by order dt. 12th Dec., 1983 had upheld the deduction under S. 80J. The extent of said deduction was further agitated in appeal before the Tribunal by the assessee and the Tribunal sustained the order of the CIT(A) vide order dt. 27th June, 1985 in ITA Nos. 52 to 55/Ind/1984 relating to asst. yrs. 1980-81 to 1983-84. It is thus, apparent that the Assessing Officer reopened the assessment for the asst. yr. 1982-83 in utter disregard of the order dt. 27th June, 1985 of the Tribunal and recomputed the income of the assessee in utter disregard of the order dt. 16th Nov., 1987 of the CIT(A). The reopening was obviously bad in law. It also needs to be borne in mind that while computing total gross income for the purpose of deductions under S. 80J, the unabsorbed depreciation cannot be taken into account vide ITO vs. Hindustan Electro Graphites Ltd. (1992) 41 ITD 223 (Ind) and so also capital subsidy cannot be deducted vide CIT vs. Bhandari Capacitors (1987) 168 ITR 647 (MP). We, therefore, find no reason to interfere with the order of the CIT(A). It is sustained.
ITA No. 1071/Ind/90 (Asst. yr. 1983-84)10. Assessment for the asst. yr. 1983-84 was framed on 16th June, 1983. It was reopened by the Assessing Officer under S. 148 r/w S. 147(b) of the Act. The reassessment was framed on 18th Feb., 1988. On appeal, the CIT(A) found that reopening was bad in law. Aggrieved by the consolidated order dt. 25th Sep., 1990 of the CIT(A), relating to the asst. yr. 1982-83 and 1983-84, the Department is in appeal.
11. Learned representatives of the parties are heard. We entirely agree with the learned CIT(A) that the Assessing Officer did not at all disclose as to what was the information in his possession and what was source thereof, which led him to reopen the assessment already completed. In the assessment order, the Assessing Officer simply mentioned as under :
"Proceedings under S. 147(b) were initiated for the following reasons :
(a) Triple shift allowance on refrigeration plant, freezing chamber and electric installation, etc., in the Cold Storage Unit was wrongly allowed.
(b) Depreciation on well and tube-well was wrongly allowed at 10% instead at 5% in respect of cold storage unit as well as Unit No. 3.
(c) Depreciation on roads and boundary had been wrongly allowed @ 10% as against correct rate of 5%.
(d) Investment allowance was wrongly allowed on well and tube-well.
(e) Deduction under S. 80J was wrongly allowed at Rs. 89,338 in respect of cold storage."
12. It is apparent that the well and tube well and roads and boundaries were treated in the original assessment, as plant and the Assessing Officer in the reassessment order was not agreeable to treat them as plant. Thereby, under the garb of S. 147(b), he wanted to review the assessment order passed by his predecessor and to open the matter already settled. He also did not take notice of the order of the Tribunal dt. 27th June, 1985 in ITA Nos. 52 to 55/Ind/1984, inter alia for this assessment year, in which the claim of deduction under S. 80J has already been decided. Thus, the reopening of the assessment was based on no information, but was only on the basis of change of opinion. Such reassessment order cannot be allowed to stand. We, therefore, find no infirmity in the order of the CIT(A).
ITA Nos. 67 & 68/Ind/88 & C.O. Nos. 11 & 12 (Asst. yrs. 1983-84 & 1984-85)
13. These two appeals are apparently misconceived. The ground of appeal taken in these appeals are the same as the grounds of appeal taken for the asst. yrs. 1981-82 and 1982-83. None of the ground of these appeals arise out of the orders dt. 16th Nov., 1987 of the CIT(A) relating to the asst. yrs. 1984-85 and 1985-86. The appeals and the cross-objections, therefore, deserve to be dismissed summarily.
ITA Nos. 409/Ind/87 (Asst. yr. 1984-85) and 323/Ind/88 (Asst. yr. 1985-86)14. The CIT considered the assessment order dt. 22nd May, 1984 for the asst. yr. 1984-85 and that dt. 11th Feb., 1986 relating to asst. yr. 1985-86 erroneous and prejudicial to the interests of the Revenue. He, therefore, by order dt. 30th March, 1987 (for asst. yr. 1984-85) and order dt. 3rd March, 1988 (for the asst. yr. 1985-86) under S. 263 set aside the assessments for these two years with directions to the Assessing Officer to make a fresh assessment. Aggrieved by the said orders of the CIT, the assessee is in appeal.
15. Learned Representatives of the parties are heard. The original assessment for the asst. yr. 1984-85 had undergone rectification under S. 154 of the Act on 6th July, 1984 and 28th Dec., 1984. Effect to these orders under S. 154 coupled with the order dt. 27th June, 1985 of the Tribunal in ITA Nos. 52 to 55/Ind/84 inter alia for asst. yrs. 1983-84 for carry forward of unabsorbed deduction under S. 80J was given by the Assessing Officer by order dt. 21st Feb., 1986. It was further rectified by order dt. 17th July, 1986. The first appeal from the original assessment was decided on 11th June, 1986. The first appeal from the original assessment was decided on 11th June, 1986. The CIT(A) found the assessment order for the instant asst. yr. 1984-85 erroneous and prejudicial to the interest of the Revenue vide order dt. 30th March, 1987 on the following grounds :
(i) Capital subsidy was not excluded in computing the capital employed for the purpose of deduction under S. 80J.
(ii) For working out the capital employed, value of depreciable assets was taken at the book value as against the written down value.
(iii) For computing the depreciation, the initial depreciation was not deducted from the written down value.
(iv) Depreciation was allowed on tube-well and roads at 10% and 15% respectively as against 5% and investment allowance was wrongly allowed on them.
(v) No extra shift allowance was admissible on refrigeration plant, freezing Chamber, electric installation and as such it was wrongly allowed.
(vi) Disallowance under S. 37(3B) was not considered in respect of commission payment, which was in the nature of expenditure on sale promotion.
(vii) Deduction under Ss. 80HH & 80-I was allowed without computing income separately in respect of unit in respect of which such deductions were admissible.
(viii) In computing the deductions admissible, it was not verified as to whether the same were within the limitation prescribed under S. 80VVA.
16. Learned Representatives of the parties are heard.
17. At outset, it may be stated that the CIT proceeded to revise the order assessment dt. 22nd May, 1984, when as stated above it had undergone change and changes by process of rectification. It may be repeated that there was a rectification on 5th July, 1984 and 28th Dec., 1984 and effect of those order coupled with the order of the Tribunal dt. 27th June, 1985 was given on 21st Feb., 1986 and the said order was further rectified by the order dt. 17th June, 1986. Thus, what was available to the Commissioner for revision was the order of assessment as finally rectified and not the original assessment order dt. 22nd June, 1984. In this connection, the following observations of Calcutta High Court in the case of Jeevanlal (1929) Ltd. vs. Addl. CIT (1977) 108 ITR 407 (All) are pertinent :
"In this case, the question is whether at the time when the impugned notice (was under S. 263) issued, the order under S. 154 stood by itself as an order of the ITO or not. In my opinion, S. 154, insofar as it rectifies the original order has the effect of rectifying the original oreder and, therefore, after the order under S. 154 of the IT Act, 1961, was passed, the order was by the order as rectified the order under S. 154."
18. In this view of the matter, the order of the Commissioner under S. 263 for the asst. yr. 1984-85 deserves to be cancelled.
19. Further, it is to be seen that the objection No. 1 (supra) taken by the CIT(A) was subject-matter of appeal before the CIT(A) vide order dt. 11th June, 1986 and therefore, the Commissioner had no revisional jurisdiction in respect thereof. In compliance with the impugned order under S. 263, the Assessing Officer reframed the assessment on 24th Feb., 1989 which was appealed against before the CIT(A). The CIT(A) decided the said appeal on 16th Feb., 1990. In that order, he held that the assessee was entitled to depreciation on road, well and tube-well at 15% and was also entitled to extra shift allowance on refrigeration plant, freezing chamber and electric installation, in the case the same were part of the plant & machinery. The Department has filed appeal against the said order of the CIT(A), but has not agitated these findings of the CIT(A). Thus, in view of the reasons stated by CIT(A), the grounds of Objections Nos. (iv) and (v) (supra) raised by the CIT are without merit.
20. There is equally no merit in the objection of the Commissioner that the deduction under Ss. 80HH and 80-I should be allowed only out of the income of the unit for which the deductions were admissible. The deductions under Ss. 80HH and 80-I are to be, no doubt, computed in respect of the unit for which deductions are admissible, but the deductions are to be allowed from the entire gross profits. For the reasons stated hereinafter in ITA Nos. 568/Ind/90 and 411/Ind/91, the commission paid was not in the nature of sale promotion and did not fall within the purview of S. 37(3A) r/w S. 37(3B). Thus, on the whole, we find that even on merit the order of the CIT does not stand. It is cancelled.
21. The CIT considered the assessment order dt. 31st Feb., 1986 (sic) relating to asst. yr. 1985-86 as erroneous and prejudicial to the interests of Revenue, on the same grounds as were taken in the asst. yr. 1984-85. For the reasons stated above, we find no merit in this order too.
22. Moreover, what we find that the assessment order was passed by the Assessing Officer after due inquiry. It is further to be seen that the Assessing Officer framed fresh assessment order on 27th March, 1989 and the appeal of the assessee therefrom was decided by the CIT(A) on 23rd Jan., 1990. The CIT(A) held that no deduction under S. 40A(8) was required to be made. The Department though filed appeal against the order of the CIT(A), but did not agitate this point. Thus, taking the totality of the facts and circumstances, what we find is that the CIT was in error in holding that assessment order erroneous and prejudicial to the interests of the Revenue.
23. In the case of CIT vs. Ratlam Coal Ash Co. (1988) 171 ITR 141 (MP), it has been held by the M.P. High Court that where the assessee had furnished all the requisite information and that the Assessing Officer considering all the facts had completed the assessment, it could not be held that the assessment order was without proper inquiries. For the purpose of holding the assessment order erroneous and prejudicial to the interests the Revenue, reference to Venkata Krishna Rice Co. vs. CIT (1987) 163 ITR 129 (Mad) may be made. The order of the CIT under S. 263 is, therefore, cancelled.
ITA No. 568/Ind/90 and Co. No. 27/Ind/1991 (Asst. yr. 1984-85) and ITA No. 411/Ind/1991 Asst. yr. 1985-86).24. Since the orders of the Commissioner under S. 263 relating to these two years have been cancelled, the reassessment framed in compliance thereof have been rendered nullity and, therefore, these appeals arising out of those reassessment orders are infructuous. However, if any finding on merit is necessary, it is recorded as under.
25. The objection of the Department is that the CIT(A) erred in holding for both the asst. yrs. 1984-85 and 1985-86 that the sales commissions paid was not in the nature of sales promotion and did not fall within the purview of S. 37(3A) r/w S. 37(3B).
26. Learned Representative of the parties are heard. The assessee had paid commission to the various persons, who had obtained purchase orders in respect of the products dealt in by the assessee. Such commission was paid on the basis of the actual purchase order procured by the commission agent from the purchaser. Obviously such payment of commission is sales expense and not expense for sales promotion. It is an expenditure not before sale, but on actual procurement of order for sale. In this connection, reference may be made to CIT vs. Sutlej Cotton Mills Ltd. (1992) 194 ITR 66 (Cal). We, therefore, find no infirmity in the order of the CIT(A).
27. Another ground of objection had been raised by the Department in the appeal for the asst. yr. 1984-85, namely, that the CIT(A) erred in directing the Assessing Officer to exclude the amount of capital subsidy from cost of assets for working out the capital employed for the purposes of deduction under S. 80J.
28. This ground of objection is equally without merit. In computation of capital employed written down value of the assets is taken. In view of the CIT vs. Bhandari Capacitors (supra), the amount of capital subsidy should not be deducted from the written down value of the assets. We, therefore, find no merit in this ground of objection too. The orders of the CIT(A) for both the years are sustained.
ITA No. 316/Ind/90 (Asst. yr. 1985-86)29. It is not pressed by the assessee.
30. In the result, all the appeals of the assessee, except ITA Nos. 409/Ind/87 and 323/Ind/88 and all the appeals of the Department and Cross Objection Nos. 11 and 12/Ind/88 are dismissed. ITA Nos. 409/Ind/87 and 323/Ind/88 and C.O. Nos. 9 & 10/Ind/88 and C.O. No. 27/Ind/91 are allowed.